The enamel knot, a transient epithelial structure, appears at the onset of mammalian tooth shape development. Until now, the morphological, cellular and molecular events leading to the formation and disappearance of the enamel knot have not been described. Here we report that the cessation of cell proliferation in the enamel knot in mouse molar teeth is linked with the expression of the cyclin-dependent kinase inhibitor p21. We show that p21 expression is induced by bone morphogenetic protein 4 (BMP-4) in isolated dental epithelia. As Bmp-4 is expressed only in the underlying dental mesenchyme at the onset of the enamel knot formation, these results support the role of the cyclin-dependent kinase inhibitors as inducible cell differentiation factors in epithelial-mesenchymal interactions. Furthermore, we show that the expression of p21 in the enamel knot is followed by Bmp-4 expression, and subsequently by apoptosis of the differentiated enamel knot cells. Three-dimensional reconstructions of serial sections after in situ hybridization and Tunel-staining indicated an exact codistribution of Bmp-4 transcripts and apoptotic cells. Apoptosis was stimulated by BMP-4 in isolated dental epithelia, but only in one third of the explants. We conclude that Bmp-4 may be involved both in the induction of the epithelial enamel knot, as a mesenchymal inducer of epithelial cyclin-dependent kinase inhibitors, and later in the termination of the enamel knot signaling functions by participating in the regulation of programmed cell death. These results show that the life history of the enamel knot is intimately linked to the initiation of tooth shape development and support the role of the enamel knot as an embryonic signaling center.